Spreadtrum 3Q net income misses Street views

AP News
Posted: Nov 08, 2012 7:46 PM

Shares of Spreadtrum Communications Inc. tumbled more than 10 percent in Thursday after-hours trading after the Chinese maker of chips for smartphones and other electronics reported a 41 percent drop in third-quarter net income on higher expenses.

The company, based in Shanghai, reported net income of $23.2 million, or 44 cents per American depositary share, for the three months ended Sept. 30. That compares with net income of $39.3 million, or 75 cents per ADS, in the prior-year period.

Revenue rose about 2 percent to $187.9 million from $184.8 million a year earlier. But Spreadtrum's operating expenses, including research and development costs, totaled $44.9 million, up 19 percent from a year earlier.

Analysts' consensus forecast called for higher earnings of 46 cents per ADS on $184.5 million in revenue, according to FactSet.

The company's operating margin, or how much money it makes from a product that it sells after paying production costs and other expenses, fell to 13.4 percent from 21.4 percent in the third quarter last year, the result of higher operating expenses.

Even so, management said it expects to see more increases in research and development spending, as the company brings new products to market and expands its portfolio of new technology. Operating margin should remain stable in the short term, however.

Spreadtrum said smartphone products accounted for 37 percent of its chipset revenue, while other products made up 63 percent. The company has begun shipping a chipset for Samsung 2.5G smartphones and expects to see shipments overall to grow in the fourth quarter.

As a result, the company projects fourth-quarter revenue will range from $189 million to $196 million. Analysts are expecting $194.7 million.

Spreadtrum shares ended regular trading up 7 cents at $21.33. The stock fell $2.33, or 10.9 percent, to $19.10 in extended trading.